Surge in Annual Transport Costs Places Strain on Australian Households

Volkswagen cars are parked in the forecourt of a inner city Volkswagen dealership in Sydney, Australia, on March 12, 2017. William West/AFP via Getty Images

Transport costs have surged by over $1,000 (US$672) annually in some Australian cities, averaging over $24,000 (US$16,126) and stressing household budgets.

The Australian Automobile Association (AAA) reported a 4 percent increase in transportation costs over the past three months, exceeding triple the consumer price index.

Sydney, Melbourne, and Brisbane households face the highest costs, averaging over $27,000 (US$18,140) annually.

Notably, increases were in specific regional towns such as Alice Springs ($21,691), Geelong ($21,604), and Bunbury in Western Australia ($21,511), where weekly transport costs surpassed $400 for the first time.

AAA Managing Director Michael Bradley said continually rising transport costs are a “heavy burden” at a time when Australians are feeling cost-of-living pressures.

“For the first time, typical households’ weekly transport costs were more than $400 in three of the benchmarked regional centres–Alice Springs, Bunbury, and Geelong. In Australia’s three largest cities, typical households paid more than $520 a week for transport in the September quarter,” he said.

He said households dedicated 16.3 percent of their income to transport in the September quarter, up from 14.9 percent in the previous quarter.

“That’s a 9.4 percent decline in affordability in just 12 months.”

He attributed the spike to higher fuel prices, upfront expenses for buying new vehicles, elevated interest rates on car loans, and higher insurance premiums.

Car loan payments were highest in Perth and Bunbury; comprehensive car insurance costs were the highest in Melbourne and Alice Springs; fuel costs were highest in Sydney and Bunbury; and public transport costs were the highest in Brisbane.

Australians paid as much as $2.11 per litre for fuel during the September quarter, with prices highest at the end of September, according to figures from the Australian Institute of Petroleum.

Mr. Bradley said that transport is a “significant and unavoidable expense” and one of the key drivers of inflation. Mr. Bradley has also urged governments at all levels to consider cost pressures when formulating policy.

The findings were drawn from a household with two adults, children, and two cars.

Driving Less Amid Rising Costs

Due to increasing transport costs, 27 percent of Australians, or 5.4 million drivers, planned to reduce their driving in the six months from April 2023.

Finder insurance expert James Martin said the cost of owning a car is taking a toll on many Australians.

“From registration to insurance to spare parts, it can feel like the car becomes a never-ending money pit,” he said.

“It’s becoming increasingly expensive to own a car, and with the cost of living sky-high, something’s got to give.”

Therefore, about 45 percent, or 9 million drivers, have chosen to skip visiting the mechanic to save money, according to Finder research.

1 in 4 (25 percent) avoided servicing their car because they couldn’t afford it, while 8 percent let scratches or physical damage go unrepaired.

Bald tyres (5 percent) and damaged windscreens (4 percent) were also put off due to financial trouble or affordability issues.

“From bald tyres to billowing smoke–Aussie roads are crowded with cars that might struggle to pass a roadworthy inspection,” Mr. Martin said.

However, he noted the cost of letting a car become unroadworthy could be far greater than these upfront payments.

Record New Vehicle Sales Despite Surging Costs

Despite rising transport prices, Australia is on track to break record new vehicle sales in 2023 after more than 112,000 vehicles were sold in November, and 1.1 million new vehicles were purchased throughout the year.

Sales were up to 30 percent higher in all states and territories compared to November 2022.

The Ford Ranger topped vehicle sales with 6,301 units, followed by Toyota HiLux (5,901), Isuzu Ute D-Max (3,692), Tesla Model Y (3,151), and Toyota Prado (3,090).

Notably, year-to-date EV sales reached 80,446, a substantial increase from the same period last year (28,326).

FCAI Chief Executive Tony Weber said there is still strong demand for vehicles across various price brackets, underscoring Australia’s dynamic and competitive automotive landscape.

He expects, however, the market to cool in the coming months amid a challenging 2024 as cost-of-living pressures hit.

‘Stark Reality’: ‘Extreme’ Financial Stress

About 80 percent of Australian households are under “extreme” cost-of-living pressures, according to a new report.

In November, Finder’s Cost of Living Pressure Gauge reached an “extreme” level of 79 percent, up from 45 percent in November 2020.

It means 78 percent of Australians feel significant financial stress, with 37 percent of homeowners and 44 percent of renters struggling to pay for a roof over their head.

It comes as the RBA’s cash rate target hit 4.35 percent, the highest since 2011 and up from the historic low of 0.1 percent.

The 13th interest rate hike pushed up monthly repayments for mortgage holders, stretching many household budgets thin.

Meanwhile, rent prices rose 6.6 percent in a year.

Finder’s head of consumer research, Graham Cooke, said households face a “stark” reality.

“Rising costs, housing stress and the reliance on credit cards for financial management are putting millions under the pump,” he said.

“Recognise areas of spending that don’t provide significant value and consider cancelling,” he urged.